Before dabbling in the coding arts, I was a Code Head (not the technology kind, the Uniform Commercial Code kind). It’s really interesting to me how law applies to new technology. In this article, I am going to discuss the effectiveness of using software license agreements in resolving virtual property right disputes that arise in massively multiplayer online role-playing games (MMORPG).
Enforceability of Shrinkwrap and Clickwrap License Agreements: Shrinkwrap licenses are terms and conditions found inside software boxes. Consumers can only read and accept the terms after opening the product. Clickwrap, on the other had, is usually found on the internet where consumers click “agree” before they can download a particular software. If the user refuses to click “agree,” he can no longer use or purchase the product or service.
Courts considered shrinkwrap and clickwrap licenses accompanying the sale of products as ordinary contracts subject to Uniform Commercial Code. ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447. Given their unilateral nature, courts have found these licenses to be unenforceable contracts of adhesion. Step-Saver Data System v. Wyse Technology, 939 F. 2d 91. In Step-Saver Data Systems v. Wyse Technology, the court relied on UCC § 2-207 and § 2-209 in refusing to uphold the disclaimer of all express and implied warranties contained in the box-top license. The court reasoned that the box-top license was not the final and complete expression of the parties’ agreement because Step-Saver ordered the Advanced Multilink computer program over the phone. The telephone order acted as the final and complete expression of the parties’ agreement; therefore, conditions added subsequent the telephone order in the box-top license are material alterations of the contract.Step-Saver Data System v. Wyse Technology, 939 F. 2d 91. Because UCC § 2-209 requires that both parties must intend to adopt the additional terms, the shrinkwrap license was unenforceable.
Modern interpretations hold that shrinkwrap licenses satisfy the assent requirements of contract law. ProCD, Inc. v. Zeidenberg reasoned that Step-Saver does not apply to ProCD because Step-Saver is a battle of the forms case, which involves parties exchanging incompatible forms. ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447. The court in ProCD relied on UCC § 2-204 to establish that shrinkwrap licenses are enforceable because “a vendor may invite acceptance by conduct and may propose limitations on the kind of conduct that constitutes acceptance.” Buyers can accept the terms of the agreement by using and keeping the software program and reject the terms by returning the package to the seller.
Courts have applied similar reasoning in the context of clickwrap license agreements. According to i.Lan Systems, Inc. v. Netscout Service Level Corp, if shrinkwrap licenses, which manifests only implied assent are enforceable, then clickwrap licenses, which require explicit assent before being able to download or use a software program, must also be enforceable. However, the court in Specht v. Netscape Communications Corporation applied the exception to the general contract rule (that users cannot avoid contractual obligation by failing to read before signing) to clickwrap licenses. This exception applies when the terms of the contract is unconscionable and the terms of the agreement are not called to the attention of the recipient. If a reasonably prudent internet user would not have known or learned of the existence of the license terms before responding to the invitation to download a software, no real assent was given; therefore, rendering the agreement invalid.
Use of License Agreements in Virtual Worlds: Shrinkwrap and Clickwrap licenses are commonly used in MMORPGs. MMORPG is a genre of computer game where thousands of players socially interact with each other in a virtual online environment through their avatars. Some MMORPGs such as World of Warcraft (WoW) are based on fantasy themes that have a character progression system in which the players focus on developing their characters’ skills by gaining experience points through completing individual or group tasks. Conversely, other MMORPGs like Second Life allow players to participate without completing particular tasks. They play solely to create virtual communities and virtual goods, socialize with others by participating in “real-life” activities and “real” cash economy.15 TX WLR 109. In Second Life, players can convert real life currency to game currency in order buy and sell virtual goods (including clothing, furniture, cars or land) and vice versa. In fact, many spend most of their time in the online universe that they’ve made selling virtual goods and land their main source of living. For example, Anshe Chung “achieved a net worth exceeding one million dollars from profits entirely earned inside the virtual world.”
In order to join the virtual world, MMORPG players must accept end user license agreements (EULA) and/or terms of service (TOS) by clicking the “I accept” button on the screen when they boot the software for the first time. Providers use EULA and TOS to protect themselves from copyright claims that can impede their discretion to manage the game and govern interactions between players. 82 INLJ 261. The players’ access to the virtual world is contingent upon their obedience to the terms of the license. For example, players cannot infringe on intellectual property of other players in Second Life and WoW prohibits the sale or transfer of in-game assets (ability and power obtained through completing certain tasks in the virtual world) and characters. Since virtual law does not exist, these terms alone protect virtual world rights.
Are Software License Agreements Sufficient to Solve Virtual World Disputes? Courts usually examine and decide different virtual property right disputes by looking at the enforceability of the license agreements. See Davidson & Associates v. Internet Gateway, 334 F. Supp. 2d 1164 (circumvention; the court held that federal copyright law does not preempt Blizzard EULA because contractual restrictions on the use of software constituted an extra element that made the claim qualitatively different from copyright infringement); Bragg v. Linden Research Inc., 487 F.Supp.2d 593 (regarding virtual land; arbitration provision in the terms of service is unconscionable; therefore, unenforceable). This approach is ineffective because software license agreements serve as a declaration of vendor’s intellectual property rights. As seen in StepSaver, ProCD, i.Lan Systems and Specht, license agreements are not designed to deal with disputes between players or protect personal property and real estate in the virtual world because it is essentially a contract between the player and the game provider.
The Second Life’s Terms Of Service states, “Virtual Land License is transferable by holder to any other user… [the holder] acknowledge that Virtual Land is a limited license right and is… not redeemable for any sum of money from Linden Lab.” Although the TOS also states that transactions between players are valid only if both “maintain their accounts in good standing, and are not delinquent on any account payment requirements,” there is no indication that Linden Lab has the authority to award injured players for loss of property or defamation in the virtual world. Many players conduct real business in the virtual world. Loss of property or defamation against their avatars in the virtual world would cause actual damage to real businesses and reputations. Because of this, I suggest using applicable law rather than looking at the license agreement in deciding these cases.
Many would disagree with using applicable law in deciding the merits of virtual disputes because the purpose of MMORPG is role-playing. Ethical conducts in the real world do not apply in virtual worlds because violence or theft is usually part of the game. Virtual goods are not tangible so they do not fall within property law. Because of this, players either should bear the risk of wrongdoing in the virtual world or virtual world disputes should be arbitrated in the game, not in real-life courts.
I agree that the impact of wrongdoing is less in the virtual world. Obviously, someone stealing your car in real life has more negative impact than someone stealing your avatar’s car in the virtual world. However, many people spend most of their day “living” in the virtual world and participating in virtual economy that loss of property or defamation against their avatars impacts real world life. In the Netherlands, a teenager was arrested for stealing virtual furniture worth 4,000 euros from “rooms” in Habbo Hotel, a 3D social networking website. The people who spent real-world money would surely want real-world remedy for their loss, especially if it’s a big sum of money.
A court has acknowledged virtual real estate rights. In Bragg v. Linden Research, Inc., Bragg sued Second Life for freezing his virtual bank account because he allegedly fraudulently exploited a feature in the software that allowed him to bid on parcels of land that were not actually for sale, allowing him to buy land in the virtual world for a low price. Bragg v. Linden Research Inc., 487 F.Supp.2d 593. At the time his account was frozen, he had $2,000 of real-world cash in his account and he owned 100 parcels of virtual land. Linden claimed that buying virtual land gave Bragg license to access Linden’s servers and storage; it did not give him title to property because it’s not real land. Instead of discussing the issue in the context of intellectual property rights, the court acknowledged that real property rights are affected by the virtual world because there was real-life harm to the deprivation of Bragg’s virtual world possessions. However, the court did not reach any concrete decisions regarding the property claims because the case was based on the unconscionability of the arbitration provision in the TOS. 15 TX WLR 109
Proponents of using EULA and TOS to resolve virtual world disputes reason that license agreements are sufficient to safeguard both the rights of the players and the game provider. The Second Life TOS allows players to retain intellectual property rights in their inventions in the virtual worlds. In 2010, it stated,
Intellectual property infringement on the service is a violation of this Terms of Service, and [players] agree not to engage in such infringement. It is our policy to respond to notices of alleged copyright infringement that comply with the Digital Millennium Copyright Act and to terminate the accounts of repeat infringers in appropriate circumstances.
Virtual goods are not real property because the aural elements players perceive when they log into the game are codes stored in the developer’s server.82 INLJ 261. The ability to retain intellectual property right in the TOS is sufficient to protect the codes written by players against others who copy, distribute or adapt that work.
The problem in this is that the DMCA Safe Harbor Provision immunizes ISPs from liability for copyright infringement if they have no knowledge of the unauthorized use of copyrighted work. This allows game providers to impose lax standards in monitoring content of their servers. In addition to this, Davidson & Associates v. Internet Gateway held that contractual restrictions on the use of software constitutes an extra element that makes a claim qualitatively different from copyright infringement. Davidson & Associates v. Internet Gateway, 334 F. Supp. 2d 1164. This means that TOSs and EULAs cannot be preempted by federal copyright laws in certain cases. As a result, game providers could ignore DMCA takedown requests and merely advice players to file an abuse report under their internal forum for resolving disputes between residents and do nothing about it. 15 TX WLR 109. This allegedly happened to Kevin Alderman, a virtual sex toy maker for Second Life avatars. When Alderman learned that someone copied his animation system and sold counterfeited SexGen brand of virtual sex toys to Second Life players, Linden Lab refused to get involved and did not discontinue the perpetrator’s Second Life account despite compelling evidence.
Conclusion: Software license agreements are not effective in resolving disputes that arise in MMORPGs because license agreements are meant to protect the providers, not consumers. The courts must look at other applicable law instead of merely looking at the validity of clickwrap and shrinkwrap license agreements to determine the merits of each case. Although the virtual world is not real, deprivation of virtual goods and defamation of avatars have real-life monetary consequences to MMORPG players.